Spicers, formerly PaperlinX, has offered its hybrid share holders a new deal that it hopes will ‘break the deadlock’ and restore the company’s capital structure.
The company issued 2.85 million hybrids at $100 in 2007, several years before the collapse of the PaperlinX operation in Europe.
“The core problem with Spicers is that as the value of shares has declined, in effect the value attached to the hybrids has become relatively larger and the company can’t pay dividends or issue new stock while the hybrids are in place and not receiving coupons,” according a spokesperson.
“The company can’t issue new capital so it’s radically restricted in what it can do. For instance, it can’t take on a new strategy and fund it through a rights issue. If they can’t resolve it, the company is severely restricted in its ability to recover. It’s hard for them to operate unless they get the capital structure resolved.
“What the board has decided to do is to put up what it believes to be a reasonable valuation which both parties – hybrid owners and ordinary shareholders - should agree to it they want to resolve the situation.”
Under the proposed deal, outlined in an announcement to the ASX, hybrid owners would be offered about $14 for their shares, an $86 loss from the original investment.
At the close of trade on 10 October 2016, the proposed transaction would represent:
• a 51.4% premium to the last SPS unit closing price of $9.00 (based on an ordinary share price of $0.0250);
• a 43.1% premium to the SPS unit 30-day Volume Weighted Average Price (“VWAP”) of $10.05 (based on an ordinary share price of $0.0264); and
• a 55.5% premium to the SPS unit 60-day VWAP of $9.76 (based on an ordinary share price of $0.0278 cents).
Implementation of the proposed transaction would create a unified and simplified capital structure. The Spicers Board believes such a structure may assist the Company in its operational turnaround. For example, Spicers may benefit by being able to raise capital and consider acquisitions beyond its current capabilities.
The company wants to issue 545 million shares, which, if accepted, would give hybrid owners 70 per cent of the company.
“The board is saying, if you’re not going to agree on a resolution we’ll put something up and have one vote from shareholders and one vote from hybrids,” says the spokesperson. “If they can get the hybrid owners and shareholders to agree, in the end, the hybrid owners would own 70 percent of the company, and ordinary shareholders would own 30 percent.”